Experian's State of Credit 2017 Annual Report showed that the average Vantage Score was 675 in 2017, compared to 673 the year before and only four points from the 2007 average of 679.
Dig deeper into those credit score numbers, and there’s even more good news. For the first time, there are more Americans with very high scores (Super Prime) than very low scores (Deep Subprime). For example, in 2017, 22.3% of Americans had Vantage Scores between 781-850 – a 6% increase versus 2016, and an improvement compared to five years ago when only 19.8% were in that range. Last year, 21.2% were below 600 – versus 22.6% in 2016 and 26.9% in 2012.
The Experian report also found generational differences in change in credit scores and mortgage debt levels.
Millennials had an average score that was four points higher than the previous year. Although they have lowered overall average debt by 8%, the age group increased their mortgage debt by 6%. Experian said the increase is a positive sign for the generation.
Generation X has the highest mortgage debt of all generations. Experience also found that the age group has a high instance of late payments compared to the national average. Despite these, consumers in this generation have improved their credit scores in 2017, signaling better debt management.
Baby Boomers and the Silent Generation continue to carry a lot of mortgage debt. However, Experian found that Baby Boomers have the lowest late payment instance and members of the oldest generation keep other debts low and make payments on time.
What Happened to Rates Last Week?
Mortgage backed securities (FNMA 3.50 MBS) lost -48 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly higher for the week.
Overview: We had very strong economic data (Retail Sales, CPI) and a very well received 30 year Treasury bond auction. Both of which pressured long bond prices. We also had news that Japan had decreased their balance sheet (aka a taper in bond purchases) and a news story (which China decried as a fake news) that China has been purchasing less U.S. debt (Treasury notes) and would decrease purchases further in 2018. That signaled to bond traders that there may be less demand and also hurt our prices.
Retail Sales: Both Headline and Ex Autos showed a monthly growth rate of 0.4% in December which matched expectations. But the real story was the upward revisions to November. Headline was revised from 0.8% to 0.9% and Ex Autos was revised from 1.0% to 1.3% which is a very strong reading.
Inflation: December's Consumer Price Index report showed an upward movement in inflation. The closely watched Core YOY CPI moved from 1.7% to 1.8%. A small move but just one more tick closer to the 2.0% Fed target inflation rate which has been stubbornly evasive in this key data set. Producer Price Index YOY hit 3.0% vs est of 3.0%.
Treasury Auctions: We had very strong demand for our 30 year Treasury bond auction with indirect bids topping 70%. $12B went off at a high yield of 2.867% which is a very good rate considering that this time last year it was 2.914%.
Small Business Optimism: The NFIB Index hit 104.9 which is a slight pull back from November's reading of 107.5. However, November's reading was a 13 year high and this reading is one of the best that we have seen. So, this is still trending at very elevated levels.
Jobs, Jobs, Jobs: The November Job Openings and Labor Turnover Survey (JOLTS) show there are 5.9M jobs that are awaiting people with the proper job skills to fill them. This is a little lighter than market expectations but basically at the same pace as October.
What to Watch Out For This Week: